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Are Democracies the Better Tax States?

A Global Comparison 1980 to 2010

Abstract

In the aftershock of the financial crisis many scholars and practitioners criticized the perceived loss of democratic control of national tax states. Many of these arguments are based on the assumption that democracies ought and should pursue policies that reflect the preferences of the majority of society. Hence, more democratic countries are expected to have higher tax ratios and more progressive tax systems than their autocratic counterparts. Yet, within the literature on regime type and taxation this assumption is more and more challenged. In this article, I summarize the arguments on the effect of democratic and autocratic institutions on the size and progressivity of tax states and test the effect of regime type on tax ratios and progressive taxation for 138 countries since the 1980s. My analysis illustrates that more democratic countries have higher tax ratios since the end of the Cold War. Yet, this effect varies over time and regime type plays no role for progressive taxation in general. Economic development on the other hand matters for both progressivity and size of the tax state. Income matters mostly for the tax state, not regime type.

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